Home building, like other U.S. industries, has been dealing with the supply side challenges of labor and material shortages. Unlike other industries, however, home builders confront an additional challenge in obtaining lots on which to build. In a recent NAHB survey, 76 percent of builders reported that the overall supply of developed lots in their areas was low to very low. This is an all time record, by a wide margin, since NAHB began collecting the information in the 1990s. The previous record was 65 percent recorded in 2018.
The information comes from special questions on the survey for the NAHB/Wells Fargo Housing Market Index (HMI). Responding to questions on the September 2021 HMI survey, 46 percent of single-family builders characterized the supply of lots simply as low, and 30 percent said the supply of lots was very low, for a total of 76 percent of builders indicating some type of problem with lot supply.
In addition to the overall supply, since 2013 the HMI survey has also asked builders to rate the supply of A, B and C lots in the areas where they build separately. As usual, shortages tended to be most acute among lots in the most desirable, or “A,” locations. Seventy-four percent of builders said that the supply of “A” lots was low or very low, compared to 67 percent for “B” lots and 57 percent for “C” lots. All three percentages are at record highs, however, indicating that lot supply problems are historically widespread irrespective of the desirability of the locations.
Along with the other aforementioned supply chain challenges, these lot supply problems are one of the reasons NAHB’s standard measure of housing affordability has fallen to its lowest level in nearly a decade.
This is great. Has this led to additional tear-down construction? I know you used to release a yearly report on this, but I haven’t seen it in a few years. Is that data still available?
We will survey teardown construction next in 2022. It is currently 6 to 7% of single-family starts.